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2021 (9) TMI 992 - AT - Income TaxSale of TMT scrap treating the same as unexplained income - HELD THAT:- The assessee’s explanation with regard to interest in the loose sheet i.e. blue diary found during the course of search was that it was for the purpose of memory and the addition could not have been made solely on the basis of loose paper which is against the well settled law in this regard - the entire alleged receipt could not partake character of profit. The profit element embedded into such receipt could be subjected to tax. There is no ambiguity under law that no addition can be made merely on the basis of loose paper without being substantiated by any corroborative evidence. In the present case, undisputedly, one of the entries of ₹ 75,000/- was found to be duly recorded in the books of accounts, therefore, in the agreement with the contention of the learned DR that such figures found on loose sheet could not be imaginary. Whether the entire receipt is correctly taxed or only the profit element should have been taxed. Admittedly, the AO has not invoked section 69/69A - only profit element should have been taxed - direct the AO to restrict the addition @ 10% of the gross receipts. This ground of assessee’s appeal is partly allowed. Disallowance of expenditure, where payment has been made in cash exceeding ₹ 20,000/-.- HELD THAT:- Agreement with the contention of the Ld. DR that the assessee was required to demonstrate that the payments which has been made in excess of ₹ 10,000/- fall under any of the exception as provided u/s 40(3) of the Act and Rules framed thereunder. Hence, the findings of the authorities below are affirmed. The ground of the assessee’s appeal is dismissed. Ad-hoc disallowance - HELD THAT:- We find merit in the contention of the assessee that both the additions has been made on the basis of surmises only. AO has made disallowance purely on the basis of guess work - AO is hereby directed to delete the addition on account of notional interest and ₹ 50,000/- made on account of ad-hoc disallowance out of car, telephone and salary of staff and other expenses. Thus, the ground no.2(iii) and ground no.2(iv) of the appeal are allowed.
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